Auto insurers in the Empire State have even more of an incentive these days to hone fraud-detection capabilities, as no-fault claim costs have risen 56 percent since 2004. According to a recent analysis by the Insurance Information Institute (I.I.I.), auto insurers' typical no-fault payment for the medical care of accident victims was $8,748 per claim in the second quarter of 2009. This represents a noticeable leap from late 2004, when the average no-fault payment stood at $5,615 per claim.
When asked about precipitating factors to the hike, Dr. Robert Hartwig, economist and I.I.I. president, pointed to loopholes in the no-fault system. In a recent press release, he added that the system is particularly vulnerable to fraud and abuse by a "no-fault industry" of corrupt medical professionals, attorneys, and street-level criminals who work on their behalf.
"The costs of fraud and abuse of the state's no-fault system ultimately are borne by New York's honest policyholders," Dr. Hartwig said. "New York's no-fault claim costs are now the second highest in the country, and are 111 percent higher than the U.S. average of $4,152."
The insurance industry as a whole, the New York State Insurance Department's (NYSID) Frauds Bureau, the National Insurance Crime Bureau (NICB), and law enforcement agencies continue to vigorously investigate suspicious claims; however, some industry leaders insist that more must be done on the legislative front to effectively quell fraud.
"State lawmakers need to make no-fault auto insurance reform a high priority when they reconvene in Albany for their 2010 session," said Ellen Melchionni, president of the New York Insurance Association (NYIA). "There are external forces which drive up the cost of auto insurance in this state which can and must be contained."
"The state Insurance Department's Frauds Bureau, in its 2008 annual report, said that no-fault fraud reports to the NYSID had increased 22 percent since 2006, after the number of these same reports fell 35 percent between 2003 and 2006,"added Dr. Hartwig. "Moreover, the Frauds Bureau has significantly expanded its number of no-fault investigations, its 2008 annual report stated."
Dr. Hartwig went on to mention that several proposals have been advanced to combat the growing no-fault crisis. Possible solutions may revolve around instituting medical protocols/utilization reviews; requiring that disputes be resolved via arbitration; streamlining the process for adjudicating no-fault claims; implementing fair burden-of-proof requirements; and strengthening anti-runner laws.
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